Diary of a Dividend Diva: The Season Kicks Into High Gear

 | May 20, 2013 | 9:00 AM EDT  | Comments
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Stock quotes in this article:

mat

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ca

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cop

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jnj

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slf

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hfc

We are smack in the middle of dividend season, so a quick look at the best upcoming dividends is in order. The table below shows the most attractive ones based on how I screen them, which takes into account ideal size, proximity to the ex-dividend date and trading volume. This list should be your starting point as you whittle down your selections to names with good charts, no upcoming news, an absence of poor trends in their industry and so on.

The table here lists only names coming this week -- quite a list for four days of dividends! On Friday we'll look at next week's wave.

Upcoming Dividends, Week of May 20
Source: FactSet

I usually have between six and eight trades going at any given time. This is because I dedicate around 40% of the partnership's capital to dividend-capture trades, with the remaining 60% invested in longer-term names that provide a "foundation," or base of stability, for the net asset value. Just using 40% of the capital, I have been able to generate 10% a year in dividend income, so that allocation is sufficient.  

(Those of you with less risk tolerance could put 60% into cash, for instance. Those with high risk tolerance could use 100% of allocated capital for dividend-capture trades, and you should be able to generate far higher than 10% a year -- but probably with much more NAV volatility.) 

I've highlighted the names I am playing at the moment. The upcoming dividends all range between 0.75% and 1%, and I tried to diversify across a number of industry groups.

SunLife Financial's (SLF) payout is higher than 1%, but it is Canadian, so about one-quarter of the dividend payment will be withheld to me as a U.S. investor. As a result, it will yield around 1% for my purposes. I am enthused about the HollyFrontier (HFC) divy, one of my "dividend champions" in 2012. Be advised that I sold HFC out of my longer-term large-cap growth portfolio, however, because the earnings estimate trend turned negative. This is an occasionally painful but necessary discipline that I will discuss Wednesday. But, for strictly playing the dividend, it is OK.

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